More than a million children in NYC public schools will get lunch for free this year, part of an effort to avoid 'shaming' those in need.

The need-blind system has shown results, but some think it's not the right policy.

The federal government spends more than $12 billion a year on school lunches.

This year, all of the more than 1 million children enrolled in New York City public schools will be eligible for free lunch, regardless of how much money their parents make.

New York is one of the wealthiest cities in the world. Yet 75 percent (roughly 780,000 children), are eligible for free or reduced lunch due to their family income, which is less than $37,000 for a family of three.

Giving out lunch based on this criterion has led to what some observers have branded as "lunch shaming." As a result, many kids chose to skip lunch to avoid bullying.

New York City Council member Ben Kallos knows that effect all too well. He grew up in the Upper East Side section of Manhattan, which is known to be very wealthy, and attended the Bronx High School of Science. However, he stood out among his classmates.

"Not only did I come from a single parent household, but a multi-generational household, which meant I was eligible for free or reduced lunch," Ben Kallos, NYC Council member told CNBC's "On the Money."

He added that every day his friends would go out and buy lunch instead of staying in the cafeteria. So he had to make a choice between friends and food.

"I would tell them I wasn't hungry, when the truth is, I was starving," Kallos said.

Advocates for the universal free lunch program say data show that more children eat lunch when it's free for everyone. According to a Community Food Advocates report from 2016, a significant uptake in participation took place at schools that provided universal free lunch. For example, middle school children participation rates went from 40 percent to 60 percent.

New York City public school's universal free lunch program qualifies for the highest level of reimbursement from the federal government, which currently spends more than $12 billion annually on school lunches, according to figures from the U.S. Department of Agriculture. Boston, Detroit, Chicago and Philadelphia are among other cities that offer similar programs.

However, not everyone agrees universal free lunch is the right policy.

"75 percent of kids in the New York school system already get a subsidized lunch. That is not a group that's in the minority - that is most kids. I think that argues against the stigma argument," James Pethokoukis of the American Enterprise Institute told CNBC.

"I want to focus on the kids who need it and make it even better for them, rather than expand it to kids who don't," he added.

He pointed to a program in San Francisco where kids use debit cards to buy lunch, or he suggested schools could have every kid punch a code into a system.

Yet Kallos said the cost of administering a system or having a point of sale would be end up being more expensive than feeding everyone with federal reimbursements.

"Every single child will be treated the same. No one will have to worry if their family can afford it…and we'll actually be giving kids an even start to life," said Kallos.